[Federal Register Volume 62, Number 6 (Thursday, January 9, 1997)]
[Notices]
[Pages 1320-1323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-498]



[[Page 1320]]

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DEPARTMENT OF COMMERCE
[A-351-824]


Silicomanganese From Brazil: Preliminary Results of Antidumping 
Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of Preliminary Results of Antidumping Administrative 
Review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the antidumping duty order on silicomanganese 
from Brazil in response to a request from one manufacturer/exporter, 
Companhia Paulista de Ferroligas (CPFL) and Sibra Eletro-Siderurgica 
Brasileira S.A. (Sibra) (collectively ``Ferro-Ligas Group''). This 
review covers the period June 17, 1994, through November 30, 1995.
    We have preliminarily determined that sales have been made below 
normal value (NV). Interested parties are invited to comment on these 
preliminary results. Parties who submit argument are requested to 
submit with the argument (1) a statement of the issue and (2) a brief 
summary of the argument.

EFFECTIVE DATE: January 9, 1997.

FOR FURTHER INFORMATION CONTACT: Hermes Pinilla or Kris Campbell, 
Office of AD/CVD Enforcement, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-
4733.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations, as amended by the interim regulations published in 
the Federal Register on May 11, 1995 (60 FR 25130).

Background

    On December 22, 1994, the Department published in the Federal 
Register the antidumping duty order on silicomanganese from Brazil (59 
FR 66003). On December 4, 1995, we published in the Federal Register a 
notice of opportunity to request an administrative review of the 
antidumping duty order on silicomanganese from Brazil covering the 
period June 17, 1994, through November 30, 1995 (60 FR 62070). On 
January 11, 1996, we received a request for review from the Ferro-Ligas 
Group covering the period June 17, 1994 through November 30, 1995.
    On May 31, 1996, Elkem Metals Company, petitioner in the less-than-
fair value investigation (LTFV) (hereafter petitioner), requested that 
the Department conduct an investigation to determine whether the Ferro-
Ligas Group made sales at prices below the cost of production (COP) 
during the 1994-1995 review period. On September 16, 1996, based on 
petitioner's allegation and the evidence on the record, the Department 
determined, in accordance with section 773(b)(2)(A)(i) of the Act, that 
there were reasonable grounds to believe or suspect that the Ferro-
Ligas Group made sales at prices below its COP and initiated a COP 
investigation of the Ferro-Ligas Group, pursuant to section 773 (b) (1) 
of the Act (see Memorandum to the File (September 16, 1996)).

Verification

    From November 18 through November 26, 1996, in accordance with 
section 782(i) of the Act, we verified information provided by the 
Ferro-Ligas Group using standard verification procedures, including on-
site inspection of the manufacturer's facilities, the examination of 
relevant sales and financial records, and selection of original 
documentation containing relevant information. Our verification results 
are outlined in the public version of the verification reports.

Scope of Review

    The merchandise covered by this review is silicomanganese from 
Brazil. Silicomanganese, which is sometimes called ferrosilicon 
manganese, is a ferroalloy composed principally of manganese, silicon, 
and iron, and normally containing much smaller proportions of minor 
elements, such as carbon, phosphorous and sulfur. Silicomanganese 
generally contains, by weight, not less than 4 percent iron, more than 
30 percent manganese, more than 8 percent silicon and not more than 3 
percent phosphorous. All compositions, forms and sizes of 
silicomanganese are included within the scope of this review, including 
silicomanganese slag, fines and briquettes. Silicomanganese is used 
primarily in steel production as a source of both silicon and 
manganese. This review covers all silicomanganese currently 
classifiable under subheading 7202.30.000 of the Harmonized Tariff 
Schedule of the United States (HTSUS). Some silicomanganese may also 
currently be classifiable under HTSUS subheading 7202.99.5040. Although 
the HTSUS subheadings are provided for convenience and customs 
purposes, our written description of the scope is dispositive.
    The review period is June 17, 1994 through November 30, 1995, and 
involves one manufacturer/exporter of silicomanganese from Brazil.

United States Price

    For sales to the United States, we used export price (EP) as 
defined in section 772(a) of the Act, because the subject merchandise 
was sold to an unaffiliated U.S. purchaser prior to the date of 
importation and the use of constructed export price was not indicated 
by the facts of record.
    We based EP on the packed, F.O.B. price to the first unaffiliated 
purchaser in the United States. We made deductions to EP for foreign 
inland freight and domestic brokerage and handling in accordance with 
section 772 (c)(2)(A) of the Act.
    The Ferro-Ligas Group reported inventory carrying costs (ICCs) and 
indirect selling expenses which were attributed to sales in the U.S. 
market. Since nothing on the record shows that ICCs are direct selling 
expenses, we consider them to be indirect selling expenses. We did not 
make an adjustment for these expenses since these are indirect selling 
expenses which are not included among the adjustments applicable to EP 
under section 772(e) of the Act.
    No other adjustments to EP were claimed or allowed.

Normal Value

    Based on a comparison of the aggregate quantity of home market and 
U.S. sales, and absent any information that a particular market 
situation in the exporting country does not permit a proper comparison, 
we determined that the quantity of foreign like product the Ferro-Ligas 
Group sold in the exporting country was sufficient to permit a proper 
comparison with the sales of the subject merchandise to the United 
States, pursuant to section 773(a) of the Act, because the Ferro-Ligas 
Group had sales in its home market which were greater than five percent 
of its sales in the U.S. market. Therefore, in accordance with section 
773(a)(1)(B)(i) of the Act, it was appropriate to look at the prices at 
which the foreign like products were first sold for consumption in the 
exporting country for NV.

[[Page 1321]]

    However, in accordance with section 773(a)(4) of the Act, we used 
constructed value (CV) as NV because all sales were below cost and, 
therefore, we disregarded all home market sales pursuant to section 
773(b) of the Act. We calculated CV, in accordance with section 773(e) 
of the Act, as the sum of the cost of manufacturing (COM) of the 
product sold in the United States, home market selling, general and 
administrative (SG&A) expenses, home market profit and U.S. packing 
expenses (see our description of adjustments to cost information 
below). The COM of the product sold in the United States is the sum of 
direct material, direct labor, and variable and fixed factory overhead 
expenses. For home market SG&A expenses and profit, because all sales 
of the subject merchandise were below the COP, we calculated SG&A and 
profit for CV in accordance with section 773(e)(2)(B)(i) of the Act, 
the actual amounts incurred and realized by the respondent in 
connection with the production and sale, for consumption in the foreign 
country, of merchandise that is in the same general category of 
products as the subject merchandise. In accordance with section 
773(a)(8) of the Act, we made circumstance-of-sale (COS) adjustments to 
CV by deducting home market direct selling expenses and adding U.S. 
direct selling expenses.

Cost of Production Analysis

    As stated above, the Department initiated a COP investigation of 
the Ferro-Ligas Group to determine whether sales were made below cost 
in the home market. See section 773(b) of the Act. Before making any 
fair-value comparisons, we conducted the COP analysis described below.

Calculation of COP

    We calculated COP, in accordance with section 773(b)(3) of the Act, 
based on the sum of the costs of materials and fabrication employed in 
producing the foreign like product, plus SG&A expenses, and the cost of 
all expenses incidental to placing the foreign like product in packed 
condition ready for shipment to the United States. In conducting our 
calculations, we relied on the home market sales and COP information 
for the six-month period surrounding the Ferro-Ligas Group's sole sale 
to the United States, except in the following circumstances:

A. Major Inputs (Use of Facts Available)

    The Ferro-Ligas Group purchased most major inputs for 
silicomanganese solely from affiliated parties. Sections 773(f) (2) and 
(3) of the Act specify the treatment of transactions between affiliated 
parties for purposes of reporting cost data (for use in determining 
both COP and CV) to the Department. Sections 773(f)(2) indicate that 
the Department may disregard such transactions if the amount 
representing that element (the transfer price) does not fairly reflect 
the amount usually reflected (typically the market price) in the market 
under consideration (where the production takes place). Under these 
circumstances, the Department may rely on the market price to value 
inputs purchased from affiliated parties.
    Section 773(f)(3) indicates that, if transactions between 
affiliated parties involve a major input, then the Department may value 
the major input based on the COP if the cost is greater than the amount 
(higher of transfer price or market price) that would be determined 
under 773(f)(2). Section 773(f)(3) applies if the Department ``has 
reasonable grounds to believe or suspect that an amount represented as 
the value of such input is less than the COP of such input.'' The 
Department generally finds that such ``reasonable grounds'' exist where 
it has initiated a COP investigation of the subject merchandise.
    Because a COP investigation is being conducted in this case, the 
Department requested in its Section D questionnaire of September 16, 
1996, and in its supplemental questionnaire of October 31, 1996, that 
the Ferro-Ligas Group provide both COP and market prices for each of 
the major inputs obtained from affiliates. In its October 16, 1996 
response, the Ferro-Ligas Group declined to provide these data for 
``commercial and competitive reasons.'' (See the Ferro-Ligas Group 
October 16, 1996 section D questionnaire response at 10-11.) In its 
November 15, 1996 supplemental cost response the Ferro-Ligas Group 
further stated that its affiliates, Usinas Siderurgicas de Minas Gerais 
S/A (USIMINAS) and Companhia Siderurgica Paulista S/A (COSIPA), were 
unwilling to provide cost data and claimed that affiliate Companhia 
Vale do Rio Doce (CVRD) was unable to provide cost data because access 
to CVRD's business proprietary information was subject to strict pre-
privatization procedures established by the Brazilian government. No 
evidence of, or details regarding, such procedures were provided in 
that submission. Because the Department's verification team left for 
Brazil on November 16, 1996, the Department was unable to follow up on 
this claim until verification.
    At verification we again requested cost information for the major 
inputs. The Ferro-Ligas Group again claimed that USIMINAS and COSIPA 
were unwilling, and CVRD unable, to provide the requested data. On the 
last day of verification, the Ferro-Ligas Group provided the 
verification team with a Brazilian court order issued in an unrelated 
case as sole support for its claim that CVRD could not provide the cost 
data requested by the Department.
    In the absence of costs for five of the eight major inputs for 
silicomanganese, the Department was unable to perform an analysis to 
determine whether the transfer prices were below the COP. Section 
776(a) of the Act requires that the Department use the facts otherwise 
available when necessary information is not on the record or an 
interested party withholds requested information, fails to provide such 
information in a timely manner, significantly impedes a proceeding, or 
provides information that cannot be verified. In addition, section 
776(b) permits the Department to use ``adverse inferences'' in 
determining facts available where a party does not cooperate to the 
best of its ability.
    In this case, as explained above, respondent declined to provide 
COP data for several major inputs purchased from affiliates. 
Furthermore, the Ferro-Ligas Group did not adequately show that it 
cooperated to the best of its ability to obtain these costs. If the 
Department were to accept a refusal by affiliated parties to provide 
data required in antidumping proceedings, this would allow such parties 
to provide data only when it would be advantageous to respondents and 
to selectively deny access to data which was disadvantageous to 
respondents. Therefore, in such situations, the Department treats 
affiliated parties as a single entity for purposes of supplying data. 
Because USIMINAS and CVRD have, directly or indirectly, controlling 
interests in the Ferro-Ligas Group, the Department presumes that these 
entities share the same economic interests as the Ferro-Ligas Group. 
Therefore, any non-disclosure of required data by USIMINAS and CVRD is 
treated as non-disclosure on behalf of the Ferro-Ligas Group. Finally, 
the Ferro-Ligas Group has not supported its claim that CVRD is barred 
from providing cost data on the major inputs because it is preparing 
for privatization. The court order provided at verification was issued 
to another party and did not apply to an antidumping proceeding; 
furthermore, the Ferro-Ligas Group provided no documentation clarifying 
what information was covered by the court order. Therefore, the 
Department has concluded that the Ferro-Ligas Group has not cooperated 
to the best of its ability and that the use of adverse facts

[[Page 1322]]

available for the costs of the affected major inputs is appropriate.
    For our preliminary results of review, we used publicly available 
data and other information to value those major inputs purchased by the 
Ferro-Ligas Group from its affiliated suppliers for which cost 
information was not provided. See Calculation Memo of the Office of 
Accounting to the File, dated December 31, 1996 (Calculation Memo).
    For the three remaining major inputs, cost data was provided. In 
accordance with sections 773(f) (2) and (3), we used the highest of 
transfer price, market price or COP. See Calculation Memo.

B. Financial Expense

    In calculating net financial expense in its response, respondent 
subtracted what it claimed to be financial income from short-term 
sources. At verification, however, company officials stated that 
certain amounts included in the financial income value were generated 
from assets held longer than one year and were investment income, not 
income earned on working capital. Moreover, respondent failed to 
provide support for the short-term nature of the remaining items 
included in the financial income value. The Department considers 
financial income from long-term investments as not being related to the 
production activities of the company and, therefore, does not allow 
financial income from long-term investments as offsets to financial 
expense in calculating COP and CV. The Department only allows financial 
expense to be offset by interest income from short-term sources (i.e., 
working capital). Because the Ferro-Ligas Group did not provide any 
documentation supporting the short-term nature of the financial income 
offsets, we disallowed its claimed offsets.

C. Value-Added Taxes (VAT)

    When calculating the CV for the subject merchandise, respondent did 
not include value-added ICMS and IPI taxes in the material and energy 
costs. Section 773(e) of the Act directs the Department to exclude from 
CV only those internal taxes remitted or refunded upon export. 
Therefore, if the VAT paid on production inputs are neither remitted 
nor refunded upon exportation of the subject merchandise, as in the 
present case, whether the producer actually recoups its VAT through 
domestic market sales is irrelevant. The Department reasons that the 
VAT taxes paid on inputs used in manufacturing merchandise for export 
is a real cost that must be recovered by being included in the price of 
the finished product sold in the export market. Thus, we calculated the 
ICMS and IPI taxes as a percentage of the total purchases of materials 
and energy, and we added the amount to the reported CV.

D. Restructuring Costs

    The Ferro-Ligas Group classified certain manufacturing costs as 
non-operating expenses, thereby excluding them from the reported COP. 
These costs fall into three major categories: depreciation and other 
costs associated with plants that were closed in prior years; costs 
associated with reducing the work force; and costs associated with 
lower production levels resulting from the bankruptcy and 
reorganization proceedings during 1995.
    The costs associated with plants that were closed in prior years 
were treated as ``other operating expenses'' on the respondent's 
audited financial statements. Such items represent the cost to the 
respondent of holding idle assets and, as such, should be included in 
general and administrative expenses. The second category, costs 
associated with work-force reduction, were treated as manufacturing 
costs on the respondent's audited financial statements. However, the 
bulk of these costs relate to severance, pension payments, and a 
settlement with the workers' union. Such costs would properly be 
considered period costs (i.e., costs that are more closely related to 
the accounting period rather than the current manufacturing costs) and, 
therefore, we have included them in general and administrative 
expenses. The third category, costs associated with lower production 
levels resulting from the bankruptcy and reorganization proceedings, 
were treated as non-operating expenses on respondent's audited 
financial statements. However, the Department normally treats such 
costs as a part of the COP. Furthermore, only one of the two producers 
owned by the Ferro-Ligas Group reduced the manufacturing costs on the 
financial statement to account for the lower production levels. The 
other producer treated these costs as normal manufacturing costs on the 
company-specific financial statement, even though for several months 
during the period a number of its facilities were shut down completely 
by the bankruptcy. Therefore, we added these costs back to the reported 
manufacturing costs.
    The Ferro-Ligas Group also deducted the minority shareholder's 
portion of the company's net loss, as well as bankruptcy and 
reorganization costs, from the general and administrative expenses 
reported to the Department. The minority shareholder's portion of the 
company's net loss is not an expense but rather is its share of the 
result of subtracting all of the company's expenses from its revenues. 
This figure is presented on the financial statement to inform investors 
of the portion of the entity's income or loss belonging to the non-
controlling shareholders. The bankruptcy and reorganization costs 
consist of items, such as legal fees, identified by respondent as 
arising from this event. Although the Department does allow for the 
exclusion of extraordinary expenses, bankruptcy and reorganization 
costs do not fall into this category. Extraordinary expenses under U.S. 
generally accepted accounting principles (GAAP) are both unusual in 
nature and infrequent in occurrence. Neither bankruptcy nor 
reorganization costs can be considered either unusual or infrequent. 
Such costs are typically incurred by entities and, therefore, should be 
included in general and administrative expenses along with other period 
costs. See, e.g., Final Determination of Sales at Less Than Fair Value: 
Certain Hot-Rolled Carbon Steel Flat Products and Certain Cold-Rolled 
Carbon Steel Flat Products From the Netherlands, 58 FR 37199-37204 
(July 9, 1993).
Test of Home Market Prices
    In determining whether to disregard home market sales made at 
prices below the COP, the statute directs us to examine whether (1) 
within an extended period of time, such sales were made in substantial 
quantities below their respective COPs, and (2) such sales were made at 
prices which permitted recovery of all costs within a reasonable period 
of time in the normal course of trade. We compared model-specific COPs 
to the reported home market price less any applicable movement charges 
and direct selling expenses.
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of respondent's sales of a given product were at prices less 
than the COP, we did not disregard any below-cost sales of that product 
because we determined that the below-cost sales were not made in 
``substantial quantities.'' Where 20 percent or more of a respondent's 
sales of a given product during the six-month period surrounding the 
U.S. sale were at prices less than the COP, we disregarded, in 
accordance with sections 773(b)(2) (B) and (C) of the Act, the below-
cost sales because we determined that the below-cost sales were made 
within an extended period of time in ``substantial quantities.'' 
Respondent reported home market sales and COP data for the six months

[[Page 1323]]

surrounding the sole U.S. sale. Given respondent's request to limit 
home market reporting, as neutral facts available, we tested whether 
respondent recovered its costs within a reasonable period of time based 
on the six months of data respondent submitted and we found that 
respondent did not recover its costs.
    We found that all of Ferro-Ligas reported home market sales were at 
below-cost prices and that such sales were in substantial quantities. 
As a result, we disregarded all of Ferro-Ligas home market sales and 
instead used CV in accordance with section 773(b)(1)(B) of the Act.

Preliminary Results of Review

    As a result of our comparison of EP and NV based on CV, we 
preliminarily determine that the following weighted-average dumping 
margin exists for the period June 17, 1994 through November 30, 1995:

------------------------------------------------------------------------
                                                                 Margin 
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
The Ferro-Ligas Group........................................      80.54
------------------------------------------------------------------------

    Parties to the proceeding may request disclosure within five days 
of the date of publication of this notice. Any interested party may 
request a hearing within 10 days of publication. Any hearing, if 
requested, will be held 44 days after the date of publication of this 
notice, or the first workday thereafter.
    Interested parties may submit case briefs within 30 days of the 
date of publication of this notice. Rebuttal briefs, which must be 
limited to issues raised in the case briefs, may be filed not later 
than 37 days after the date of publication. Parties who submit argument 
are requested to submit with the argument: (1) a statement of the 
issues and (2) a brief summary of the arguments.
    The Department will publish a notice of final results of this 
administrative review, which will include the results of its analysis 
of issues raised in any such comments or at a hearing, within 120 days 
from the publication of these preliminary results.
    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Upon completion 
of this review, the Department will issue appraisement instructions 
directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of the final results of this administrative review for 
all shipments of silicomanganese from Brazil entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided by section 751(a)(1) of the Act: (1) The cash deposit rate for 
the reviewed company will be the rate established in the final results 
of this review; (2) for merchandise exported by producers or exporters 
not covered in this review but covered in the original LTFV 
investigation, the cash deposit will continue to be the most recent 
rate published in the final determination or final results for which 
the producer or exporter received an individual rate; (3) if the 
exporter is not a firm covered in this review, or the original LTFV 
investigation, but the producer is, the cash deposit rate will be the 
rate established for the most recent period for the producer of the 
merchandise; and (4) if neither the exporter nor the producer is a firm 
covered in this or any previous review, the cash deposit rate shall be 
17.60 percent, the all-others rate established in the LTFV 
investigation (59 FR 55432, November 7, 1994).
    This deposit rate, when imposed, shall remain in effect until 
publication of the final results of the next administrative review.
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 353.26 to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this review period. Failure to comply 
with this requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act and 19 CFR 353.22 of the Department's 
regulations.

    Dated: December 31, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-498 Filed 1-8-97; 8:45 am]
BILLING CODE 3510-DS-P